Shattered success factor

AirAsia Big Boss Tony Fernandes should come out and boldly admit to the public some of his pronouncements of his low cost carrier success all these years may not be truly as he claimed to be.

The Star story:

AirAsia X finds fictitious services

Friday, 28 August 2015

AirAsia's plane is seen take off from KLIA2 during the AirAsia and AirAsia X new office ground breaking ceremony in Sepang. AZMAN GHANI / The Star

AirAsia’s plane is seen take off from KLIA2 during the AirAsia and AirAsia X new office ground breaking ceremony in Sepang. AZMAN GHANI / The Star

It involves 24 payments totalling RM7.01mil made to a service provider

PETALING JAYA: Long-haul budget airline AirAsia X Bhd has discovered payments for fictitious services that adds up to RM7mil.

In a filing with Bursa Malaysia, the firm said its internal and external auditors had recently discovered that certain payments had been made to a service provider between the period of 2010 to 2014 for services which were now established to be fictitious.

“Following the discovery of the irregularities, the board has on the recommendation of the audit committee appointed PwCCS to carry out a forensics audit and instructed the management to ensure the availability of all relevant documents and/or key personnel for PwCCS review and interview, where applicable,” the aviation firm said.

During the course of the forensics audit, the auditor PwCCS discovered 24 payments totalling RM7.01mil had been made to a service provider for fictitious services.

The payments were authorised by a person in a management position within AirAsia X.

Based on the forensics audit findings, the irregularities had been confined only to a sum of RM7.01mil, it added.

“The board is of the opinion that the amount involved in the irregularities does not have any material financial or operational impact on the company,” AirAsia X said.

Following the discovery, the company has taken several measures to safeguard its assets and interest.

Among others, it has sought legal advice on the possible courses of action the company can take to recover the losses and lodged a police report.

On top of that, it is reviewing the current internal control process to ensure that similar transactions will not recur.

“The board could not make any announcement earlier as it did not have sufficient evidence to substantiate the allegations and to assess with certainty the financial and operational impact to the company,” it said.

For the second quarter ended June 30, the firm raked in RM653.03mil for its revenue but made a loss of RM132.94mil. That’s compared to a revenue of RM671.61mil and net loss of RM128.79mil in the previous corresponding quarter.

During the quarter, the group recognised unrealised foreign exchange loss on borrowings of RM30.9mil as compared to a gain of RM31.9mil a year earlier due to the weakening ringgit. It also saw lesser passengers flown but average passenger fare has increased by 7.2%.

For the first half-year, its topline was at RM1.43bil while losses sum up to RM258.86mil. Net asset per share stood at 20 sen per share.

The stock traded 1 sen higher to 16 sen with a turnover of 19.17 million shares.

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Needless to say, this is very embarrassing admission to Bursa Malaysia, which is an avenue to tell all the stakeholders of AirAsia X. It includes the customer base.

These transactions are pro-rated to be RM 1.4million a year or almost RM120,000 per month. That is about RM4,000 per day.

FY 2014 AirAsia X posted a revenue of RM2.94billion and net loss of RM529million. That is half a percent of daily takings which had been discovered gone into one the fictitious service providers.

It could be assumed that a fraction of what the consumers paid for AirAsia X services did not go to the services that they paid for but probably is a part of a continuous scam, which slipped through AirAsia X’s safety net.

Simply, the consumers may not get what they actually paid for. Now, the market talk is if this falling out of AirAsia’s safety net is true, is that the extend of the leakages from the transactions derived from its online portals or third party payment gateways.

That is counter productive to Fernandes’s success story for the longest time, is based on the low operating cost by eliminating ticket sales through third party agents.

What is embarrassing that Fernandes continuously proudly claimed that e commerce is one of AirAsia’s key success factor.

Nextupasia.com story:

3 AirAsia Success Factors

3 AirAsia Success Factors that entrepreneurs should look at to grow their businesses. 10 years on after taking a bold chance to start a low cost airline, Tan Sri Tony Fernandes has built AirAsia from two planes to 115 aircraft today, flying to more than 400 destinations spanning 25 countries, making the slogan “Now Everyone Can Fly” comes true.
So what are AirAsia Success Factors?
When the music industry failed to adapt quickly to the World Wide Web, Tan Sri Tony Fernandes decided to make a clean break. He left his job to pursue a childhood dream: Set up Asia’s 1st ever Low Cost Airline.

Today, AirAsia is named as the World’s Best Low-cost Airline for 4 consecutive years 2009 – 2012 by Skytrax. Air Asia has become a household brand in Malaysia and beyond in less than a decade.

In my opinion, Air Asia has not just only revolutionized the entire airline industry but more significantly, it has allowed more Malaysians especially the younger generation to travel abroad and see the world.

AirAsia Success Factors

This experience has enabled many Malaysians to be critical to the nation’s developments; they count the blessing of their mother land but at the same time, give constructive criticism by comparing to more developed nation as well as to progress which went awry.

There are indeed, a lot of lessons for Start Up to take home from AirAsia stories. Tan Sri Tony Fernandes has shared with BBC on his way of doing business.

He adopts a “walk around” management style. “If you sit up in your ivory tower and just look at financial reports, you’re doing to make some big mistakes.” For a few days every month he works on ground or in the cabin crew and he made important decisions by getting the feedback from the crew.

Being a big fan of AirAsia and its business model, there are 3 AirAsia success factors to learn from:

1. Never afraid to challenge the norm.

A few years ago, people had to call a travel agent or airline operator to buy a flight ticket. Air Asia challenged the norm by riding on the e-commerce wave. It invested in a user-friendly website interface and allows travelers to book and print flight ticket anytime and also introduce online check in services. This has proven to be enormously successful especially in engaging with the Gen-Y customers.

AirAsia Success Factors

2. Dare to Think Big and Serve the right Customer

Air Asia business model has always been focusing in low cost operation and serving the mass market. They know their targeted customers well and do not directly compete with other premium airlines. 10 years ago traveling by air was a luxury. Air Asia was daring enough to think big and today, it is truly “Everyone Can Fly”.

3. Create Complementary business opportunities, they can be Huge

This is shared by Luke Bong and I think it is an exemplary example for businesses to learn.

AirAsia Success Factors

When we fly AirAsia, most likely we will use their services such as Sky Bus from KL Sentral or stay at Tune Hotel. It is very important to think of innovative ways to get more out of your existing customers.

The question is not about how to squeeze more profit out of the existing operations, but how to provide add on values so that customers are willing to pay for even more.

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Announcement to Bursa Malaysia is not enough enough considering that Fernandes is aloud when criticising and even dramatising against other corporations, especially Malaysia Airports and Malaysia Airlines.

Example, recently AirAsia  made a big ruckus about the defective Malaysia Airports’ KLIA2 and making a claim against the GLC which is part of Khazanah Holdings Bhd.

Bloomberg story:

AirAsia Demands $107 Million Damages From Airport Operator

Michael Arnold
July 31, 2015 — 5:09 PM HKT Updated on August 1, 2015 — 8:24 AM HKT

AirAsia Bhd., Southeast Asia’s largest budget carrier by market value, is asking the Kuala Lumpur airport operator for 409 million ringgit ($107 million) to cover losses and damages the airline says it suffered using the new and old budget terminals.
AirAsia sent a letter Friday demanding payment from Malaysia Airports Holdings Bhd. and a subsidiary, claiming they breached their duties at the airport. The letter claims problems at the new klia2 terminal have hurt the airline’s reputation, “as the public perception is that the failings of the facilities are within the control of AirAsia” as klia2’s largest user.
The 4 billion ringgit terminal, which opened in May 2014, is sinking, causing cracks in the taxiways and pools of water that planes must drive through, Bloomberg News has reported. AirAsia says the defects could cause flight delays, increase wear and tear on planes and pose safety risks.
Malaysia Airports says the depressions and ponding are caused by soil settling unevenly in the apron and taxiway, where some of the structure is built on piling and some stands on normal ground. The operator has patched and resurfaced problem areas and is building a concrete slab that it says will serve as a more permanent solution by next April.
In a statement late Friday, Malaysia Airports called AirAsia’s claims “baseless” and said it would “vigorously challenge them.”
“We are surprised by some of these assertions about klia2” and the old low-cost carrier terminal “after AirAsia has benefited from the facilities provided by Malaysia Airports since 2001 to grow into the largest LCC in Asia,” the airports operator said in the statement.

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Its time Fernandes literally put his money where his loud mouth is or was. To be exact, RM7.01million.

Published in: on August 28, 2015 at 23:00  Comments (9)  

Arul: Let the investigators do their work

1MDB President and Group Executive Director Arul Kanda Kandasamy gave a landmark interview on TV3 Soal Jawab last night. His prompt and casual answers are reflective of his confidence on the highly controversial strategic investment corporation of he Malaysian Government.

Bernama.com transcript:

Full Transcript Of TV3 Interview With 1MDB President And Group Executive Director

KUALA LUMPUR, Aug 12 (Bernama) — 1Malaysia Development Bhd (1MDB) President and Group Executive Director Arul Kanda spoke on wide-ranging issues raised about the sovereign wealth fund, including investigations into its affairs conducted by Bank Negara Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission and the Public Accounts Committee (PAC).

Arul also elaborated on the implementation of the 1MDB’s rationalisation plan that would be able to resolve its debts within four to six months.

He said 1MDB was on track to meet its strategic development objectives and did not encounter problems in wooing investors, but was saddled by political accusations and allegations.

Here is the full transcript of TV3’s Norzie Pak Wan Chek and Izwan Azir Salih’s conversation with Arul on the “Soal Jawab” programme last night:

PREAMBLE: 1MDB president and group executive director Arul Kanda, in a statement, has asserted that he was fully responsible for any action against the company after helming it. He gave the commitment to carry out his job professionally and to provide all the necessary information to assist the authorities seeking the truth behind 1MDB affairs. Arul was appointed to carry out a strategic evaluation of 1MDB and now he spearheads the implementation of its rationalisation plan which was tabled to the Cabinet on May 29. So far this plan, which is set to reduce the company’s debt level, is running smoothly. This was attested from the repayment of loans amounting to RM3.6 billion which was announced on June 8.

First and foremost, let us get to know Arul, who was previously a banker in Abu Dhabi, the United Arab Emirates and the UK. You have experience in restructuring companies, but not many people know you well until after the 1MDB affairs become public knowledge.

QUESTION: It is understood that you have a legal background.

ANSWER: Yes, I have an LLB and a Masters in Law degree and studied in the UK for several years, after which in went into investment banking in London, Bahrain, Dubai and previously Abu Dhabi.

QUESTION: When you were given the responsibility to lead 1MDB, it was debt-ridden, its governance was questionable. What motivate you to accept the responsibility? Probably there were specific reasons related to the situation faced by 1MDB then?

ANSWER: There were many things that we needed to see before taking up a new post. As a professional, I was intrigued with the news that I heard and read on the internet and social media on 1MDB while I was in Abu Dhabi. I heard a lot about 1MDB and its challenges. I would like to know more about it and also with the background that I have in my work and the knowledge that I have on this kind of work. The opportunity to return home and to implement the rationalisation plan was an opportunity that I needed to take as a professional. And we have to try and see what we can do.

QUESTION: Were the circumstances described on 1MDB before similar after you had returned home?

ANSWER: Most of them were similar. Ironically, there were mostly negative news, but the audience needs to know that 1MDB is the biggest power producer in Malaysia. It also owns strategic areas in Kuala Lumpur and in other parts of Malaysia. So business is as usual, we carry out daily tasks, but there were challenges to be overcome, especially the company’s debts. So to me as a professional, we look at the whole picture, not part of it only. The whole picture is what I had identified before returning home, there but there were other challenges such as the political situation and so on – which is not my expertise. I am a businessman and a banker, not a politician, so it was a little difficult.

QUESTION: So, in other words, before you joined 1MDB you were mentally prepared to face the brickbats or the debts payable and so on and certainly you had a special plan to drive 1MDB towards a better direction?

ANSWER: Alhamdullillah, a workforce of about 1,100 professionals in 1MDB go about their daily duties to generate power, and develop TRX and Bandar Malaysia and so on. So to me, it’s running smoothly and we do not need to worry. But on the part of the financial burden, it takes a lot of air time in Malaysia, it is a bit difficult. But my background in the Middle East in the implementation of rationalisation plan was indeed my expertise, as well as legal and banking expertise. InsyaAllah, we can carry out the plan that was presented to the Cabinet on May 29, 2015.

QUESTION: Let’s talk briefly on 1MDB’s core businesses as to the general public it is a company bogged down by debts. Briefly tell us about 1MDB background.

ANSWER: It is rather difficult to give a brief story as it is actually a lengthy one, but I will try. It originates from the Terengganu Investment Authority (TIA) that was established as a sovereign wealth fund, so a government fund, but it was changed because it was then only for the state of Terengganu, so when Datuk Seri Najib (Tun Razak) became the prime minister, a decision was made to convert TIA to 1Malaysia Development Bhd (1MDB).

So with the change, the strategic direction of the company converted to a strategic development company. This means the company delves into projects in the interest of the country to become catalysts, create new way hybrids for the private and government sectors, and also to bring in foreign direct investment.

So, that’s the first chapter. Secondly, 1MDB model from the beginning was to develop projects through loans. Why? Why use debts? At that time, when we used loans to buy assets such as land or cash-generating power stations, so the debt burden could be borne.

And the government then injected RM1 million into the company, so that other government funds can be used to build schools, hospitals and so on. So the model can be leveraged and we can use government funds for other things.

But when we implemented projects by taking loans, what is important is the execution. It meant that the 1MDB’s plan was to carry out an IPO for the power generation company and secondly, to implement a master plan to develop its lands and break them into parcels for sale as well as to build infrastructure, for an example the Tun Razak Exchange. 1MDB will spend RM3 billion to upgrade Jalan Tun Razak to build infrastructure and direct connections to the highways – MEX, Smart and so on.

So all these activities were the responsibility shouldered and carried out by 1MDB. That was the 1MDB’s plan from the beginning. But after several years, various allegations were hurled against it, the critics and so on definitely complicated plans to run the IPO or sometimes even to sell land was difficult.

That’s where the mismatch was, an imbalance between incoming cash flow, the cash required to pay the debts. At that time, the government decided to implement a strategic review and after that a rationalisation plan to correct the situation as the original proposal could not be fully implemented. So we need to handle the matter through the rationalisation plan.

QUESTION: Is there a need for a business model like 1MDB in Malaysia and is there a duplication in the role played by 1MDB and Khazanah Nasional Bhd. Can you explain?

ANSWER: Basically both companies are complimentary, it means they support each other. If we were to see Khazanah Nasional, it has successfully managed government assets such as Tenaga Nasional Bhd, Telekom and others.

The government shares were transferred to Khazanah Nasional which also implements several new projects, including in Iskandar and so on. On the other hand, 1MDB carry out greenfield projects such as the takeover of land in TRX which used to have a hawkers market, a temple, a mosque and squatters.

As for Bandar Malaysia, it still has an air base there, so 1MDB has the responsibility to build eight new camps, namely six for the Defence Ministry and two more for the Home Ministry in several parts of the country at the cost of RM2.7 billion, so 1MDB has to develop them from scratch. There is nothing there and we have to develop the area which is different from the role played by Khazanah.

QUESTION: Tell us your vision of where you are taking 1MDB in the face of negative remarks and wild accusations.

ANSWER: I understand why the comments and criticisms were leveled against 1MDB, but we have the facts. My responsibility is to provide the facts on 1MDB so that the wrong assumptions can be corrected and we have been doing that. More than 48 press releases had already been dished out by 1MDB, a lot of information and facts were uploaded on our website, Facebook and Twitter and so forth in our strive to paint the correct picture on what is being done by us.

As we can see, 1MDB is among the biggest power companies in Malaysia, but that is not what we see. Unlike this table than can be pounded, electricity cannot be seen, and the same goes for TRX and Bandar Malaysia. When we look at the (Sungai Besi) air base and Bandar Malaysia, it looks as if there is nothing there, but as I mentioned earlier, 1MDB is building eight camps throughout the country and the project is in progress and will completed by the end of 2016.

It takes time and expenditure and so on, it’s 1MDB’s responsibility. Just like TRX, we are spending RM3 billion for infrastructure in TRX, but the infrastructure is not visible now as it is mostly below and so forth.

InsyaAllah, when we completed the infrastructure, the buildings will rise from there. Developing land to build new power stations will take time and it is something that cannot be seen physically or openly, but will materialise soon.

QUESTION: Most of 1MDB board members have outstanding business track records. Why then 1MDB is saddled with unwarranted remarks on its business performance? From your evaluation, what can you perceive on the company’s corporate governance before you took over the helm?

ANSWER: So, first of all, what is important for us is to find out what is 1MDB’s real problem. The real problem is cash flow which is mismatched. We have long-term assets that need to be developed overtime, but the cash flow coming our way should be used to pay debts as the problem was due to mismatch and liquidity, financial liquidity.

On governance, if we were to look back at several things that needed to be done, but for every decision made, what is important is that decisions were made correctly in the proper business context as well as in the context of time, which is also important.

When we looked back there were things that could have been done in other ways. So, at the time the decisions were made the context should be seen, and also whether all requirements were taken into consideration in coming to the decisions, and to me, they had been done that way.

In business, it’s different, there are plans implemented that failed due to internal or external factors. So what is important is that when we look at the challenges, we need to take action, if something was not done according to the requirements, it needs to be corrected and hence, we have the rationalisation plan at this juncture.

Q: You said earlier that 48 press releases have been issued and you have appeared on TV3 many times. Are you satisfied with the explanations, which on social media don’t seem too clear?

A: We are still making improvements on this matter. We are always improving and trying to make it better for ourselves. So for me, every time we issue an explanation or issue a press release, it helps us to give a clearer, truer and complete picture on 1MDB.

But the reality is, 1MDB is a complex and large company with about RM50 billion in assets, and it has other subsidiaries, and many transactions are done every day. We are also not listed on Bursa Malaysia. If there’s a need to come up with an explanation, we try to achieve a balance between carrying out our daily business and giving the explanation.

But to me, for most of the very critical questions that need answers, it is better investigations are carried out, because some are just accusations. Not many people are interested in the fact that the Cabinet has asked the Auditor General to investigate 1MDB.

So the process has come up with an interim report to the PAC, and to me the report is so complete, detailed and done professionally. So the answers we have given and in future will come from the ongoing investigations.

Q: Unfortunately, some of the investigations are still internal in nature and cannot be divulged to the public. In your opinion, what more can be done so that 1MDB can repay its debts in the time allotted?

A: The issue of debt repayment is the reason for the rationalisation plan, and as we are a company, the original plan was to buy land, an IPO and so on.

For now, the original plan cannot be implemented. So for this rationalisation plan, if the company has a liquidity problem or cash flow mismatch, there are really just three solutions.

The first is getting new funds from shareholders, or issue new equities. Secondly, we sell assets and repay the debts. And thirdly, we invite new funds from new investors. But for 1MDB we take the third approach.

So EDRA Energy is in the process of joining several local and international companies to buy some of the shares owned by 1MDB in the company. The money obtained will be used to settle the debts.

The value of EDRA is estimated at between RM16 billion and RM20 billion. Insyaallah (God willing), we will be able to repay the debts when we sell part of the company.

Secondly, in June 1MDB signed a township agreement with IPIC of Abu Dhabi. IPIC, a company owned by the Abu Dhabi government, is valued at US$60 billion. And the township is for IPIC to take over 1MDB’s debts, which actually have bveen guaranteed by IPIC. The principal and debts come to about US$3.5 billion. IPIC has also paid US$1 billion which we have used towards the debt settlement.

So if we exchange our assets with IPIC, 1MDB’s debt burden will be reduced by RM16 billion to RM17 billion.

Thirdly, 1MDB is in the process of bringing in development partners to Bandar Malaysia. The process is being implemented with about 40 companies which have shown inteterest in becoming development partners for Bandar Malaysia.

To me, if Bandar Malaysia is sold at RM550 to RM600 per square foot, its value would be between RM11 billion and RM12 billion.

If we combine the three, they will become proceeds towards debt settlement, and the three processes are proceeding smoothly, but it will take about four to six months to complete.

Q: 1MDB’s business model needs a high degree of confidence from lenders, companies that will help us generate capital. How is investors’ confidence, amid negative talk about 1MDB? Are we sure the ongoing process will be continued?

A: Alhamdullillah (praise be to God), 1MDB’s assets are fundamentally strong. Their strong fundamentals have given the investors confidence. They are focusing on the fundamentals. For example, the revenue from EDRA is about RM5 billion a year from energy, that will bring value to the company.

The Bandar Malaysia land is in KL. There is no land of such size near KLCC and the KL city centre, that’s the only land available. We add to the high speed terminal there two, or potentially three, MRT lines, the KTM Komuter and so on. The value of the land is not constrained by current prices.

What that means is, the opportunity is immense, that’s why the investors are willing to discuss. Look at KL Sentral, KLCC, Mid Valley — now there are all sorts of development there, but when it was started the confidence was low. However, investors could see the long-term vision.

Q: How would IPIC (through acquiring EDRA’s assets) find the property developers to buy land in Malaysia? Is this a normal procedure, or, as some would say, a not so wise move?

A: 1MDB’s original plan when buying separate utility companies was to combine them into a bigger entity. The objective then, in 2012 and early 2013, was to implement an IPO.

For the TRX and Bandar Malaysia land, the original objective was to come up with a master plan, get planning approval, and put in the infrastructure and sell a small portion of the land.

Acquiring assets using the debts, and selling the assets, will bring in new funds. The funds will be used to repay the debts. The difference is caused by cash flow mismatch and liquidity concerns. We were forced to come up with a new plan, which is to bring the funds to strategic investors, but the long-term plan remains.

In business, there are always difficulties, but what is important is the need to overcome the challenges, that is my goal. My job is to resolve the issue. That is why I was brought into 1MDB.

Q: Are we still on track, or are we far off-target?

A: Not to me. For instance, with TRX, we are in the process of selling the TRX land as in the original plan: with the entry of Main Board-listed companies to buy 17 of the 70 acres in TRX; selling the land to the Mulia Group, a prominent Indonesian company; and recently, to Affin Bank, which wants to build its headquarters.

So the plan is ongoing. With the power plants, we are still ongoing — 5,000 Megawatts every day — the difference is whether we sell the shares through an IPO or sell to strategic investors. In the current market situation, it is probably better for us to sell to strategic investors.

Q: The PM has said 1MDB’s debts can be settled in six months. With the current global economic condition, and the value of the ringgit against the dollar, is six months a sufficient time period for the debts to be repaid?

A: I am confident the time period is sufficient, considering the condition of the company and market. Like what was said before about EDRA, we shortlist interested local and overseas investors. Just like for Bandar Malaysia, 40 prominent companies from Malaysia and from outside — China, Australia, Singapore and the Middle East — are interested in buying the land.

These assets are long-term assets. We cannot look at it just from the current perspective, as they will take a long time. These companies understand we cannot take a short-term view but rather a long-term view.

Like I said, 1MDB’s assets are strong, and we can implement the rationalisation plan to solve this cash flow problem.

Q: In discharging your daily duties as President and Executive Director of 1MDB, do you faced any interference or are you given the freedom to make decision involving and affecting the direction of the company?

A: Corporate governance has several sections. As the management, we have a board of directors, shareholders. So, decisions must (be made) through or by using the stipulated methods of governance. Alhamdulillah (All praises be to Allah), for 1MDB, every major decision we made, either strategic review or rationalisation plan, is through the three segments. We collaborate and work together as a team. So, from the shareholders’ perspective, the Finance Ministry, board of directors and management are always collaborating and exchanging ideas for the implementation of team rationalisation plan.

Q: So, there is no interference?

A: Not of outside of that. We debate and discuss. For me, that is not interference, that is just the way for corporate governance, through the management of the board of directors and shareholders.

Q: About debt and settlement of debt, at the end of the day, will 1MDB be able to generate profit or will all income generated now be sufficient only to settle the debt and that no profits could be made by 1MDB?

A: We have two situations. Firstly, the current challenge is to settle the debt, which has two segments, namely interest and principal. The issue of ‘cash flow mismatch’ is the most important matter at this moment as we need to settle the debt to bring the company back to a stable position. That is our priority right now.

In the long term, if we can reduce the company’s burden of debt and bring it back to a stable level, by settling the debt using the company’s operating income, InsyaAllah (God willing), we will gain profit through the two (segments) which should be looked in a comprehensive manner. What matters most is that we must stabilise the situation in order to move forward.

Q: How do you plan to stabilise the situation with the current perceptions?

A: It’s difficult and the pressure is high, but we have plan and that plan is implementable, it’s a very realistic plan. For me and the 1MDB team, I always remind them to focus on the plan, no matter what the allegations or criticisms hurled at us. That’s normal in business and we have to accept that. The people have the right to voice out their opinion and if we can learn something from them, we have to take it into consideration and use it further develop the company.

Q: On the depreciation of ringgit, what action will 1MDB take to prevent its external debts denominated in the US dollar from continuing to burden the company? Is there any specific plan to address the problem?

A: There are two parts. Firstly, 1MDB has power companies in foreign countries, such as in Bangladesh and Egypt, and 1MDB is the largest independent power producer in both countries.

Besides, we also have power assets in Abu Dhabi and Pakistan, which are generating funds in the form of US dollars. This means that we have natural hedge for which cash flow is accepted in US dollars to pay off debts in US dollars.

Secondly, 1MDB also has various assets in the form of US dollars that could be pledged against the US dollars.

Q: When you sit down with reporter, you will definitely be asked unexpected questions. I want to know the sentiment of questions asked by investors interested in the TRX land, Bandar Malaysia and IPP. What is the sentiment and the costs that had to be borne, in terms of energy and arguments to convince the investors that their investment in 1MDB is a safe investment.

A: We look at the opportunity to invest, the questions are not just on the fundamental assets, but also on political allegations which are worrying the investors, for when we invest our money in certain project, of course the economic or political situation became an important matter for the implementation.

The method that we use is to show them the plans for our power companies and land for the long term, maybe 15 or 20 years from now, and investors will understand that from time to time, there will be some political and economic issues.

We see how Malaysia had gone through a number of challenges in the past 20 or 30 years, but the graph is going up and we have to remember that although, right now, there are concerns and worries about some issues, if proper steps are taken, eventually the situation will improve.

Q: So you are suggesting that the investors are not too upset with existing sentiment in the country after looking into the company’s long-term plan?

A: Yes.

Q: Regarding the Public Accounts Committee’s (PAC) investigation which is still pending following the appointment of PAC members as part of the new Cabinet line up, how far the 1MDB is willing to tell the truth about the transactions and what happened in the company?

A: In 1MDB, not only the PAC. 1MDB is open to various investigations, from most investigation companies in Malaysia, from Bank Negara, MACC, PDRM, A-G, Auditor-General and the PAC, and each investigation is still ongoing and never stop, and we always give the required information to facilitate the investigations.

With PAC, we were ready to go to their office on Aug 4 to 6, but because of the changes taking place at the PAC, the meeting was postponed. We are prepared to go back to the PAC, if a new date is set, to present our facts.

The postponement has also made it difficult for us because as 1MDB, we really want to answer some questions and counter the allegations made against us, but when the meeting was postponed, we did not get that opportunity.

PAC, in my view, is the right institution. The best of all investigations to present, because there are opposition and the government. That means the questions that we will be asked are from both parties and it is our responsibility to convince not only the government, but also the opposition.

That is important.

Q: So, the joke made by members of the public and certain quarters that 1MDB would feel so relieved with the postponement is actually not true because you are ready to face the PAC?

A: It is indeed not true because my friends and I, including the board of directors, are all set to face the PAC.

Q: In your opinion Mr Arul, how comprehensive the investigations carried out by the PAC, Auditor General and the likes will be, taking into account the aspects of the allegations, which are not limited to 1MDB account?

A: For me, the investigations are being carried out so thoroughly as the Bank Negara has to look at the overall picture. PDRM, for example, with the several police report made against 1MDB, has been looking in detail into the reports and the same goes with the MACC. Each department has their own specialty in carrying out the investigations, not only on the accounts scrutinised by the Audit Department, but files and computers have also been taken from 1MDB, and that are not limited to the answers that were already given.

Q: How about the connection of certain individuals with some political leaders in country? Can it be investigated and is it under the jurisdiction of the investigating agencies?

A: To me, every investigating agency is doing their job in a professional and comprehensive manner. It is their right to carry out their duties and as a professional, I have also discharged my duties to the best of my abilities and Prime Minister (Datuk Seri Najib Tun Razak) has stated publicly that if any wrongdoing was found, action will be taken. Now, it is up to the agency to carry out the investigations in a comprehensive and professional manner.

Q: Mr. Arul, let say something bad happens, like the rationalisation process did not run smoothly and the debts could not be settled within the stipulated time, will it affect the country’s economy?

A: That is an important question as the government has provided a guarantee for RM5.8 billion of 1MDB’s debt, and there is also a letter of support for RM11.5 billion, so it’s important for us to implement the rationalisation plan so we can settle the debts and not burden the government. Alhamdulillah, 1MDB assets are strong and currently, there are investors who have shown interest to purchase the assets at market prices. To us, the rationalisation plan is clear, for us to solve debt issues, but if for any reason it was not happening, we need to remember about companies such as Edra Energy, that we have other options which may be sold one by one. So, with such strong assets, our options are many and we can take reasonable time, as long as the principal and interest, for the debts can be settled.

Q: In a nutshell, are you confident and optimistic to lead the 1MDB out of this negative episode to become a company that can really made the nation proud?

A: To me, what is important is that the investigations must continue, the truth and the facts must be made public by the independent investigators. Don’t take our word on it in a transparent and professional manner. That is more important. It is not my duties to find fault, it is the responsibility of the investigating agencies. My responsibility is to settle the debts that are burdening the company.

With the support of 1MDB staff and shareholders, Ministry of Finance, InsyaAllah (God willing), we will be able to settle the debts. Overall, it looks good, for the future is clear. I’m confident, that’s why I’m here today. I returned to Malaysia to do my job.

— BERNAMA

Published in: on August 13, 2015 at 23:00  Comments (9)  

Big Brother is Watching!

The Singapore Government is reported to use spyware to go into its citizens’ computers and copy files, record Skype calls, read e mails, messages and access to password, all in the name of ‘national interests’.

Digital News Asia story:

Singapore is using spyware, and its citizens can’t complain

By Gabey GohAug 03, 2015
Leaked Hacking Team documents lists industry regulator IDA as a customer
Citizens have no rights to privacy, but Govt concerned about public trust

THE Singapore Government is using spyware that can copy files from your hard disk; record your Skype calls, e-mails, instant messages and passwords; and even turn on your webcam remotely – and if you’re Singaporean, you have no constitutional right to complain.

Yes, that’s right – the Singapore Constitution does not include a right to privacy. In addition, because of various pieces of legislation including the Criminal Procedure Code (amended in 2012) and the Computer Misuse and Cybersecurity Act (amended in 1997), the Government does not need prior judicial authorisation to conduct any surveillance interception.

Indeed, the regulatory structure governing the surveillance of citizens is very much controlled by the Executive branch, with little judicial oversight, according to Eugene Tan, assistant professor with the School of Law at the Singapore Management University (SMU).

“I would say that we are in a state of affairs in which very little is known about what the Government conducts surveillance on, how it does it, and the regulatory controls in place.

“The courts have placed a lot of premium on the Executive’s assessment of what national security requires,” he told Digital News Asia (DNA) via email.

The use of surveillance tools – or spyware – by nation-states was brought to the forefront again in July after Italian spyware maker Hacking Team was hacked, and information on its business released on the Internet.

The leak of 300GB worth of data offered a look inside a segment of the security industry that is typically hidden in secrecy.

Disclosed documents showed that Hacking Team had 70 current customers, mostly military, police, federal and provincial governments across the world, and that it had recorded revenue above €40 million (US$44.5 million).

Three Malaysian government entities were named in these records: The Malaysia (sic) AntiCorruption Commission, the Prime Minister (sic) Office and an unknown entity known only as Malaysia Intelligene (sic).

The Infocomm Development Authority of Singapore (IDA) was also listed as a current customer, after it renewed its maintenance contract with Hacking Team for the company’s Remote Control System software in February.

Malaysian civil liberties lawyer Syahredzan Johan told DNA that if it were indeed true that the Malaysian Government was spying on its people, “then major violations of our fundamental liberties would have taken place.”

“Article 5 of the Federal Constitution provides that all persons have the right to life and personal liberty. Personal liberty here includes the right to privacy, as recognised by the Federal Court,” he said.

“So the law recognises the right to privacy. Spying on citizens is a violation to this right to privacy. As such, it contravenes Article 5 of the Federal Constitution,” he added.

The colonial context

Singapore, however, does not afford its citizens such rights. Tan told DNA that the regulatory regime in Singapore was geared towards concerns of national security from the outset.

“So matters like judicial authorisation and where the constitutional rights fit in were probably not incorporated from the start.

“We must remember that we inherited the colonial British apparatus in internal security matters, and so rights did not feature prominently,” he said.

However, Tan said that beyond legal controls, the Government is mindful that any improper use of surveillance apparatus and internal security laws would result in a massive loss of public confidence.

“So this abiding need to maintain the legitimacy, trust and confidence is foremost. It would be accurate to say that the regulatory regime in Singapore is [guided] by non-legal restraints like maintaining public confidence, rather than a reliance on legal mechanisms.

“In short, [it’s] a very different approach altogether from what we see in other liberal democratic controls,” he said.

Depth of surveillance unknown

In its June 2015 report entitled The Right to Privacy in Singapore: Stakeholder Report Universal Periodic Review 24th Session, Privacy International said that despite some evidence from security researchers, details of the capacity of the Singaporean Government to conduct surveillance and the scope of its surveillance infrastructure remain unknown.

Privacy International is a human rights organisation that works to advance and promote the right to privacy around the world.

“Yet, it is widely acknowledged that Singapore has a well-established, centrally-controlled technological surveillance system designed to maintain social order and protect national interest and national security,” the report said.

The surveillance structure in Singapore spreads wide from CCTVs (closed-circuit televisions), drones, Internet monitoring, access to communications data, mandatory SIM card registration, identification required for registration to certain websites, and the use of big data analytics for governance initiatives including traffic monitoring.

[Download the full Privacy International report here.]

In 2013, Citizen Lab of the University of Toronto found evidence that PacketShaper, produced by the US-based security firm Blue Coat Systems Inc, was in use in Singapore.

PacketShaper allows the surveillance and monitoring of user interactions on various applications such as Facebook, Twitter, Google Mail, and Skype.

Citizen Lab also found command and control servers for FinSpy backdoors, part of Gamma International’s FinFisher “remote monitoring solution,” in a total of 25 countries, including Singapore.

FinSpy is malware – a software program that gives its operator the ability to observe and control an individual’s computer or mobile device – produced by British-German company Gamma International.

However, the Singapore Government has denied using spy software.

Lack of concern

Asked about how the general Singaporean population felt about the carte blanche permission the Government has when it comes to surveillance, SMU’s Tan said it perhaps is a case of “ignorance is bliss.”

“There is implicit trust that surveillance is specifically for security concerns alone, and that there is no mass surveillance.

“Most of the time, people don’t think about these things. But all it takes is for one scandal to occur and the state of play will be very different,” he added.

Asked about what controls there were to prevent the use of private surveillance industry products to facilitate human rights abuses by the Government, Tan said he was not aware of any such controls in place.

“But the Singapore Government treads very carefully to ensure that it stays within the law and does not run afoul of its human rights obligations,” he said.

“And where there is use of third-party products, I believe the controls are robust, particularly with what information and surveillance data is provided to or obtainable by private vendors and how they are used,” he said.

Some laws in Singapore regulate the processing of personal data, including in the public sector, such as the Computer Misuse and Cybersecurity Act which criminalises unauthorised access to data. However, they do not regulate or address the lawful collection of data.

Other safeguards for privacy and personal data are included in the Official Secrets Act, the Statistics Act, the Statutory Bodies and Government Companies (Protection of Secrecy) Act, and the Electronic Transactions Act.

Laws that regulate data held by private sector entities include the Personal Data Protection Act, the Banking Act, and the Telecommunications Act; whilst other relevant legislation include the law of confidence, which addresses misuse and publication of confidential information.

Tan said that judicial review could be one mechanism by which concerned citizens could challenge the Government’s decisions and actions.

“But the difficulty is always obtaining evidence that one has been ‘surveilled’ indiscriminately or for unlawful purposes,” he said.

Refusal to ratify international covenant

The Privacy International report also noted that Singapore has not ratified the International Covenant on Civil and Political Rights (ICCPR).

Article 17 of the ICCPR provides that “no one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.”

“This raises significant concerns in light of the fact that the legal framework regulating interception of communication falls short of applicable international human rights standards, and judicial authorisation is sidelined and democratic oversight is non-existent,” the Privacy International report said.

Tan said that Singapore has not indicated any intention to sign the ICCPR.

“But the Government here is conscious of the need to do right – especially by the law. So while the regulatory regime is relatively opaque, there are probably internal controls to ensure proper use of the extensive powers of surveillance,” he said.

But Tan also argued that the first challenge is to recognise that there is a need for a regulatory regime that is not centred exclusively on the Executive. This recognition is particularly relevant to the Government.

“Once there is this recognition, then there would be a need to consider the type of regulatory regime,” he said.

“In the Singapore context, we can be sure that the Government would rather [have] a regime that grants it generous latitude about how it conducts surveillance and the broad liberty to exercise discretion in making such decisions.

“A third challenge is the need for civil society to meaningfully engage the Government without the Government being concerned that a more robust regime would curb its operational effectiveness and efficacy – while ensuring that the maintenance of national security does not result in abuses of rights,” he added.

– See more at: https://www.digitalnewsasia.com/digital-economy/singapore-is-using-spyware-and-its-citizens-cant-complain#sthash.hN4mua6V.dpuf

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If this report is true, see how the people just across from the southern-most city on continent Asia is dealing with getting tough on their own netizens.

The Singapore Government is very determined that the national interest supersede anything else.

Yesterday, Prime Minister Dato’ Sri Mohd. Najib Tun Razak urged the Malaysian Communication and Multimedia Commission to get tough on those who abuse, misuse and adulterate social media platforms for sinister purposes which could destabilise the nation.

Considering that the Prime Minister personally has been demonised and major Federal Government ministries, agencies and commissions have been under constant attack, the strike against the abusers, misusers, hackers and habitual liars within the cybersphere should contained and reprimanded a long time ago.

Published in: on August 3, 2015 at 15:00  Comments (18)  

Happy 30th Birthday Proton

It has been thirty years since the world saw the roll out of Malaysia’s product of the National Car Project, Proton.

It was then Prime Minister Dato’ Seri Dr. Mahathir Mohamad’s determined vision to bring the nation’s industrialisation policy and progress into the next level. Venturing into high technology, he was determined that Malaysia should produce its own automobiles.

Perusahan Otomobil Nasional was the creature incorporated to deliver Heavy Industry Company (HICOM) first national car project.

Mitsubishi of Japan was the technological and solution partner and Proton Saga was started as a rebadged Mitsubishi Lancer. It was a learning curve for Malaysian engineers.

The eco-system had to be developed. Malaysian SMIs started to toy into making parts for this new car. Cottage industries started to grow to fabricate many plastic parts.

That journey has now been thirty years and after four million cars built and delivered, Proton could be proud of its indigenous models such as the iconic Waja, Persona, Second generation Saga, Preve, Suprima and latest is Iriz.

Proton did manage to make considerable impression in the global market in one way or another.

Needless to say, there were many challenges and the ups and downs and corporate dramas along the way. A good example was when Proton was part of  DRB-Hicom Group under the ambitious entrepreneur Tan Sri Yahya Ahmad, it acquired the Norwich based Samuel Chapman’s Lotus Car Ltd. as part of strategic planning and growth.

An interesting fact is that Malaysia is one of 11 countries in the world which design and produce its own automobiles.

Proton is by far single most influential mechanical equipment amongst the majority of Malaysians. There is hardly any Malaysians who lived in this country the past thirty years who has no experience what so ever with any models of the national car project.

Today, Proton’s 800 engineers are dedicated and committed to follow through what started as a leader’s dream to be a component of the Vision 2020 developed nation status in five years time. The Group is supported by a vendor system of 189 fabricators and manufacturers.

And they have a plan. Actually, three plans. Proton just announced that three new models would be introduced next year.

Proton to unveil three new models next year

Wednesday, 8 July 2015

SHAH ALAM: Proton Holdings Bhd, which celebrates its 30th anniversary on Wednesday, will introduce three new models next year to boost sales and financial performance, said chairman Tun Dr Mahathir Mohamad.

He said the new models are an improvement over the existing Saga, Persona and Perdana models with the collaboration of Japanese car manufacturer Honda.

“In the automotive industry, we are always borrowing technology. Major car companies are always exchanging technology. In this regard, we are only using Honda’s platform with the rest coming from our own efforts.

“The new models are equipped with the latest safety features and design. I really hope that all three models will enter the market in stages from January next year and will be well-received,” he said at Proton’s breaking of fast function here on Wednesday.

He said while Proton’s performance was not so good at present, the company had been working hard to produce quality cars such as the Iriz.

“I find the Iriz to be very good because it is very light and easy to drive compared with foreign cars of the same quality, but consumers’ response has not been ecouraging. However, of late the response to our Preve model has been better,” he said.

Dr Mahathir said the decline in Proton car sales had affected the cash flow of the company, which has had to hold back on executive staff salary increases.

“We have to make sacrifices to remedy the situation. Bonuses, although not much, will still be given, but with better sales they could probably be higher,” he said. – Bernama

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These replacement models are designed and developed by Proton engineers. It is learnt that from late 2017, Proton would start to introduce the NE01 engine which was acquired from Petronas, developed jointly by Petronas and Sauber.

Congratulations, Proton.

*Updated Thursday 9 July 2015 1000hrs

Whether or not there is still protectionism in place for the automobile industry especially when ASEAN AFTA for automobile has been implemented since 2010, Proton cars is still competitive in the market and in some of the models, it is value for money especially with the equipment offered.

The Sun Daily story:

Proton is ‘most affordable’ car in Malaysia

Posted on 9 July 2015 – 05:27am
Last updated on 9 July 2015 – 11:25am
Shahrim Tamrin
newsdesk@thesundaily.com

KAJANG: Proton has been officially inducted as producing the most affordable car with the best safety ratings for the consumers in the country.

According to the latest report for car price ranges versus safety star ratings released on Tuesday by the New Car Assessment Programme for southeast Asian countries, or Asean NCAP, Proton has been singled out for selling three car models with five-star ratings at the lowest prices.

The Proton Iriz 1.6 litre selling at RM41,076 and equipped with two airbags and electronic stability control (ESC), took the first place for the cheapest car under the five-star category for Adult Occupant Protection (AOP) – driver and front passenger.

The Proton Preve executive model priced at RM57,686 and Proton Suprima S executive (RM75,748), with both cars offering six airbags and ESC, took second and third place respectively, followed by Ford Fiesta, Honda Jazz, Honda City, Honda Civic and seven other foreign car models subsequently.

Iriz scored well with 14.07 points (out of 16 points), which is within the five-star range for AOP, as a result from the frontal offset crash test at 64 km/h impact.

Under the “‘affordable safety” agenda launched by Asean NCAP since last year, its secretary-general Khairil Anwar Abu Kassim said the regional consumer-vehicle safety-testing body is applying pressure with manufacturers to produce safer cars at affordable prices.

He pointed out that to produce safer cars was relatively easy compared to advise prospective owners to purchase cars with top safety ratings.

“A few years back and until today, pricing still plays a major factor when purchasing a car, yet safety concerns are growing especially in Malaysia and Thailand,” he added.

Asean NCAP chairman Prof Dr Wong Shaw Voon said in future, “consumers will not accept anything less than a five-star safety car”.

*************

Published in: on July 9, 2015 at 00:30  Comments (2)  

Summertime

Fitch reversed its initial ratings projection on Malaysia and unequivocally attest to the sound fundamentals in the Malaysian economy and fiscal policies.

Bloomberg story:

Malaysia Escapes Fitch Downgrade on Improvement in Finances

by Y-Sing Liau
July 1, 2015 — 1:51 AM HKT Updated on July 1, 2015 — 10:29 AM HKT

\
Fitch Ratings maintained Malaysia’s credit ranking at the fourth-lowest investment grade after signaling a downgrade earlier this year, saying finances are improving and growth remains steady. Stocks and the ringgit rose.
The outlook on the nation’s A- grade was revised to stable from negative, Fitch said in a statement Tuesday. A new consumption tax and fuel subsidy reforms are supportive of Malaysia’s finances even as federal government debt and explicit guarantees continue to increase, it said.
Concerns Malaysia could be downgraded for the first time since the Asian financial crisis have hurt sentiment in its asset markets with the currency near the weakest in a decade. Fitch had repeatedly warned contingent liabilities such as rising debt at a state investment company were weighing on the rating, contributing to investors souring on the country.
“Malaysia’s rating remains supported by reasonably strong real GDP growth rates and low inflation volatility,” Fitch said. “Fitch views progress on the Goods and Services Tax and fuel subsidy reform as supportive of the fiscal finances. A further narrowing of the deficit is forecast in 2015 despite lower oil prices.”
Malaysian stocks jumped the most in more than two years Wednesday, with the benchmark index climbing as much as 1.8 percent. The currency rose 0.8 percent to 3.7420 against the U.S. dollar as of 10:18 a.m. local time, data compiled by Bloomberg show. It was the worst performer in Asia in the first six months of 2015 and traded close to 3.8 this week, the level at which it was pegged from 1998 until 2005.
Differing Outlooks
Fitch lowered Malaysia’s outlook to negative in 2013, citing weaker prospects for public finances. Moody’s Investors Service and Standard & Poor’s also rank Malaysia at their fourth-lowest investment grades. Moody’s has a positive outlook, while S&P’s is stable.
Andrew Colquhoun, Fitch’s head of Asia Pacific sovereign ratings, warned in March that there was more than a 50 percent chance of a downgrade. The Southeast Asian nation would “sit more naturally in the BBB range,” he said March 18.
The ratings affirmation gives Prime Minister Najib Razak more time to improve the country’s public finances, which have been weighed down by rising debt at state investment company 1Malaysia Development Bhd. and a decline in oil revenue.
1MDB’s borrowings amounted to 41.9 billion ringgit ($11.2 billion) as of March 2014 in part for the purchase of power plants and land. As the company’s troubled finances threatened Malaysia’s rating, Najib faced calls from former premier Mahathir Mohamad to step down as leader because of the performance of 1MDB, whose advisory board he chairs.
Sovereign Support
“Fitch continues to believe that the Malaysian sovereign is incurring additional contingent liabilities beyond explicit guarantees because of quasi-fiscal operations of state-owned entity 1MDB,” it said. “Fitch thinks there is a high probability that sovereign support for 1MDB would be forthcoming if needed.”
The decline in oil prices over the past year and the prospect of higher U.S. interest rates are also adding to pressure on the ringgit. Malaysia is an exporter of crude and derives about 22 percent of government revenue from energy-related sources.
Najib has trimmed expectations for expansion this year as his government cut expenditure amid lower-than-expected income from oil. The economy is forecast to grow 4.5 percent to 5.5 percent in 2015.
While Southeast Asia’s third-largest economy has run a fiscal deficit since 1998, the gap as a percent of gross domestic product has been narrowing. To boost state coffers, Najib scrapped a decades-old fuel subsidy policy in December and started a 6 percent goods and services tax in April.
The prime minister seeks a balanced budget by 2020 from a deficit target of 3.2 percent this year.

************************

This is what Fitch thought on the Malaysian economy let year:

Bonds | Wed Jul 23, 2014 7:28am EDT Related: CURRENCIES, BONDS, MARKETS, FINANCIALS


Fitch Affirms Malaysia at ‘A-‘, Outlook Remains Negative


(The following statement was released by the rating agency) HONG KONG/LONDON, July 23 (Fitch) Fitch Ratings has affirmed Malaysia’s Long-Term Foreign and Local Currency Issuer Default Ratings at ‘A-‘ and ‘A’ respectively. The issue ratings on Malaysia’s senior unsecured local currency bonds are also affirmed at ‘A’. The Outlooks on the Long-Term IDRs remain Negative. The Country Ceiling is affirmed at ‘A’ and the Short-Term Foreign Currency IDR at ‘F2’.

KEY RATING DRIVERS The affirmation of Malaysia’s IDRs with Negative Outlooks reflects the following key rating drivers:- – Public finances are Malaysia’s key sovereign credit weakness and remain a source of downward pressure on the ratings. Federal government (FG) debt stood at 54.7% of GDP by end-2013, above the median of 50% for the ‘A’ rating category.

Malaysia’s FG debt ratio rose 14.9 points over 2008-2013, above the median increase of 12 points for the ‘A’ rating category. FG-guaranteed debt rose to 15.9% of GDP at end-2013 from 15.2% at end-2012 and 9% at end-2008. Taken together, explicit FG debt plus guarantees stood at 70.6% at end-2013, up from 48.8% at end-2008. – The government has set out a path of budget deficit targets, which, if followed, would stabilise and eventually reduce the headline FG debt ratio. The government targets a 3% deficit (on its definitions) in 2015, down from 3.5% in 2014 and 3.9% in 2013.

However, the path to achievement of the targets remains unclear. In particular, the shape of a new goods and services tax (GST), to be introduced in April 2015, has yet to be fully determined. The GST by itself is unlikely to deliver the targeted reduction in the deficit and additional revenue or spending measures would probably be required. It remains to be seen whether these will materialise. – Sustained heavy public sector deficits could increase the chances of the current account moving into deficit, which in turn could increase the possibility of disruptive volatility in portfolio capital flows.

The current account surplus as a proportion of GDP declined from an average 13% per year over 2003-2012 to 3.7% in 2013. Fitch projects the surplus to remain in the low single digits over 2014-16. Malaysia has experienced a decline in the savings rate and a rise in the investment rate driven partly by government deficits and partly by the Economic Transformation Programme, a government-led effort to raise investment. – High and rising household debt risks magnifying the impact of any future increase in macroeconomic volatility on the credit profile. Household debt rose to 86.8% of GDP at end-2013, up from 81.3% at end-2012 and 60.4% at end-2008, and above the US’s level (80.6% in 1Q14).

The central bank has warned that easy monetary conditions could lead to a broader build-up of economic and financial imbalances. The banking system indicator of ‘bbb’ is in line with rating peers. The net impaired loan ratio declined to 1.3% in 2013 from 1.4% in 2012, and the system’s common Tier 1 equity was 12.1% at end-May 2014. – Fitch believes contingent liabilities on the sovereign are rising beyond officially acknowledged debt and guarantees. The non-financial public sector ran a consolidated deficit of 13.6% of GDP in 2013, fuelled by 13.2% of GDP in capital spending by non-financial public enterprises. The government projects the deficit at 9.4% in 2014. Outside formally guaranteed debt, the state-owned investment vehicle 1MDB had further debt of 3% of 2013 GDP by March 2013, according to its published statements.

Despite the lack of formal guarantee, Fitch thinks there is a high probability that sovereign support for 1MDB would be forthcoming if needed. – Malaysia’s credit profile is supported by the high share of local currency denominated debt (97% of total debt at end-March 2014), and by relatively well-developed local capital markets and the high domestic savings rate, which support sovereign funding conditions. The share of domestic government securities held by non-residents was 26.8% at end-March 2014, although this figure has been stable in a range of 24%-28% since end-2011.

Local bidders, including the state Employee Provident Fund, could potentially buffer any volatility in foreign participation, although a withdrawal of foreign capital could still be temporarily disruptive and could drive a decline in foreign reserves. – The external finances remain a sovereign credit strength, notwithstanding diminishing current account surpluses. Malaysia’s net external creditor position of 29.6% of GDP at end-2013 exceeded the ‘A’ median of 10.8%.

Malaysia has experienced an unbroken run of annual current account surpluses since 1998. Official foreign reserves of USD134.9bn were worth 6.1 months of current external payments at end-2013, against a median 4.4 months for the ‘A’ range. The sovereign’s own net foreign assets were worth 19.7% of GDP at end-2013, exceeding the ‘A’ median of 12.8%. These factors provide important buffers given Malaysia’s higher export commodity dependence than peers (31% in 2013 against the ‘A’ median of 18%). – Malaysia’s average income level (at market exchange rates), broader level of development, and World Bank governance indicators are weaker than ‘A’ category medians and closer to ‘BBB’ category norms. These structural features weigh on the credit profile.

However, Malaysia’s relatively favourable demographic outlook supports medium-term growth prospects. – Malaysia’s real GDP growth is expected to average 5.6% per year over 2010-2014, well ahead of the ‘A’ median (3.5%). The level and volatility of inflation are in line with the ‘A’ median. Assessment of the strength of Malaysia’s macroeconomic performance is qualified by the contribution from large public sector deficits and rising private-sector leverage. Public investment contributed 1.5pp of 2012’s 5.6% growth rate, although official data indicate the contribution eased to 0.2pp of 2013’s 4.7% growth.

RATING SENSITIVITIES The Negative Outlooks reflect the following risk factors that may, individually or collectively, result in a downgrade of the ratings: – Fiscal slippage relative to the government’s targets and lack of progress on structural budgetary reform – Further rapid growth in FG guaranteed debt or other contingent liabilities – Emergence of “twin deficits” where failure to consolidate the public finances is associated with the emergence of a sustained current account deficit – A shock to interest rates or employment sufficient to impair household debt servicing capacity, leading to problems for the banking system – A shock to foreign investor confidence in Malaysia that leads to capital outflows on a scale that impairs Malaysia’s sovereign external balance sheet (via foreign reserves depletion) or proves disruptive for economic and financial stability. Given the Negative Outlooks, Fitch’s sensitivity analysis does not currently anticipate developments with a material likelihood of leading to a rating upgrade. However, future developments that may, individually or collectively, result in a revision of the Outlooks to Stable include: – Further progress towards achieving the government’s interim 3% deficit target by 2015 – Greater confidence in the authorities’ commitment to containment of direct and indirect public indebtedness in future KEY ASSUMPTIONS – Evolution of the global economy broadly in line with the projections in Fitch’s June “Global Economic Outlook”; in particular, the ratings assume a continued gradual recovery in the advanced economies and that China avoids a slowdown to a low single digit growth rate; and that oil prices do not decline substantially – No escalation of regional or global geopolitical disputes to a level that disrupts trade and financial flows – Maintenance of basic political and social stability in Malaysia Contact: Primary Analyst Andrew Colquhoun Senior Director +852 2263 9938 Fitch Ratings (Hong Kong) Ltd. 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Santiago Mosquera Director +1 (212) 908 0271 Committee Chairperson Paul Rawkins Senior Director +44 20 3530 1046 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on http://www.fitchratings.com Applicable criteria, ‘Sovereign Rating Criteria’ dated 13 August 2012 and ‘Country Ceilings’ dated 09 August 2013, are available at http://www.fitchratings.com. Applicable Criteria and Related Research: Sovereign Rating Criteria here Country Ceilings here Additional Disclosure Solicitation Status here

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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Invariably, the confidence on Prime Minister Dato’ Sri Mohd. Najib Tun Razak’s administration and policies to move the economy forward with existing Transformation Agenda coupled with the recently tabled 11th Malaysia Plan (11MP) and 1MDB restructuring plans approved by Cabinet late May, brought upon these revisions of stance.

Published in: on July 1, 2015 at 12:15  Comments (1)  

The spiraling bogeyman story

As it has been the past month or so, 1MDB and Group Executive Director Arul Kanda Kandasamy quite quickly respond to the unsubstantiated allegations and issues brought forth in the sinister connotation to confuse and riddicule the general public.

Media statement issued by 1Malaysia Development Berhad on 23 June 2015

For immediate publication

Asset acquisitions driven by long-term view

1MDB notes a recent Wall Street Journal article suggesting that 1MDB had overpaid for the acquisition of its energy assets. As we have previously stated, we only acquire assets when we are convinced that they represent long-term value, and to suggest that any of our acquisitions were driven by political considerations is simply false.

The fact of the matter is that these claims are a repetition of old allegations that have been driven by political opponents of the Government, including the former Prime Minister Tun Dr Mahathir Mohamad. They have never been substantiated nor supported by evidence, just as Tun Mahathir has never produced any evidence for his claim that RM42 billion was missing from 1MDB, because the reality is that this RM42 billion is debt backed by RM51 billion of assets.

1MDB takes a long-term view of value when entering into transactions; not just for the company, but for the country, as befits our 100% ultimate ownership by the government of Malaysia. The acquisition price we paid was based on this long-term view, as well as advice received from independent valuation advisers, and the prevailing market conditions at the time. On this basis, we believe that the value paid upon asset acquisition – which may have involved a premium in certain instances, as is common when acquiring another business – is commensurate with the existing and future potential of the assets.

It is important to note that since acquiring the first energy asset in 2012, 1MDB has built a leading international independent power producer in Southeast Asia. The portfolio currently comprises 13 power plants in five countries, along with the rights to construct further gas and solar-powered plants. Today, Edra Energy is the second largest independent power producer in Malaysia, and the largest in Egypt and Bangladesh, with additional operations in Pakistan and the United Arab Emirates. In total, it has gross installed capacity under management of 6,619 MW with an effective capacity of approximately 5,594 MW.

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The onslaught will still go on simply because many parties want to see Prime Minister Dato’ Sri Mohd. Najib Tun Razak resign or be toppled through the sinking of the strategic investment company 1MDB.

This is the more sophisticated ‘Malay Spring’, which was funded and planned by organisations all the way up to personalities like George Soros.

After all, almost twelve years ago a statesman proclaimed “The Jews rule the world by proxy”.

Published in: on June 23, 2015 at 14:00  Comments (13)  

Seeing light at the end of the tunnel

1mdb_logo_21022014_large

Time. Is the single most important component and commodity in unravelling and making good the entire mess within Federal Government strategic investment corporation 1 Malaysia Development Berhad (1MDB).

That is what was said by an independent observer to one of the UMNO State Information Chief on late Sunday evening, right after party President Prime Minister Dato’ Sri Mohd. Najib Tun Razak met an assembly of all Information Chiefs at Division, Wanita, Pemuda and Puteri level in PWTC.

Pro=Anwarista The Malaysian Insider story:

Najib promises to solve 1MDB saga by year’s end
BY RAM ANAND

Published: 14 June 2015 6:24 PM

Prime Minister, Datuk Seri Najib Razak walks out from PWTC after briefing Umno division information chiefs on current issues. – The Malaysian Insider/Afif Abd Halim, June 14, 2015.
Prime Minister, Datuk Seri Najib Razak walks out from PWTC after briefing Umno division information chiefs on current issues. – The Malaysian Insider/Afif Abd Halim, June 14, 2015.
Prime Minister Datuk Seri Najib Razak today promised Umno leaders and pro-establishment non-governmental groups that he would solve controversies surrounding 1Malaysia Development Berhad (1MDB) in two months, at the earliest.
Najib said so during a closed door session with Umno division information chiefs and NGOs at the Putra World Trade Centre (PWTC) today, according to one of the attendees.

Hasan Hamzah, who is de-facto leader of the group Gabungan Bertindak Perpaduan Melayu, said Najib had made this pledge and given a timeframe of between two to six months.

“Earliest is two months, but at any rate, he said he will solve it by the end of the year,” Hasan said when met at PWTC, which houses the Umno party headquarters.
Other Umno leaders, however, remained coy about the details of the closed door briefing which began earlier this afternoon.

The briefing today was held for Najib, who is also Umno president, to address party grassroots leaders on the recently-tabled 11th Malaysia Plan, the goods and services tax (GST) and other current issues.

Najib is hard-pressed, too, to explain allegations concerning 1MDB, which is his brainchild and which sits on a RM42 billion debt incurred in six years of operations.

Hasan said that since 1MDB is a business entity, solving it won’t be done in a short time.

“A lot of the allegations against 1MDB are just from the opposition. The PM admitted there are problems, but this is a business entity, it has enough assets,” he said.

“But it cannot be done immediately. So that is what the PM is asking for – time. If we give him enough time, he would be able to solve all the problems,” he added.

Hasan also urged Najib to meet former prime minister Tun Dr Mahathir Mohamad as soon as possible to explain the same to the latter.

“It’s all about a clash of personalities, Tun had his way of administrating, now Najib has his own style,” he said.

Hasan said that Najib, without specifically referring to Dr Mahathir, had said that since Umno supports him, he would stay in the job and solve the problems.

“He said he cannot bow down to an individual’s pressure, whoever that may be,” he said.

“The PM is just disappointed. He feels we shouldn’t be fighting for an issue that is not big,” he added.

Dr Mahathir had repeatedly called for Najib’s resignation.

Hasan said that representatives from 1MDB and the Ministry of Finance were also in attendance during the briefing.

Meanwhile, Umno Youth information committee member Rozaidi Jamil said that if Najib had explained such details earlier, many of the controversies surrounding 1MDB would not have taken place.

“What was explained was very clear. If this was explained before this, we would understand. Why wasn’t it answered before?” Rozaidi said.

He also said that if Dr Mahathir had been in attendance today, even he would be supportive of Najib. – June 14, 2015.

– See more at: http://www.themalaysianinsider.com/malaysia/article/najib-promises-to-solve-1mdb-saga-by-years-end#sthash.lMlK324O.dpuf

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Needless to say, many are still fuzzy about what happened and what steps to be taken. Some are still skeptical. However, majority are still wishful that all are able to be made good for the betterment of many, especially the Malays.

“Give it time. All the mess would be made good and the money would be there and the benefits for all these strategic investments meant eventually for rakyat through programs which would alleviate their socio-economic standing would eventually transpire and materialise”.

And systematically bit by bit, 1MDB starts to unravel all the questions and malign allegations thrown at them. In the utter convenience, connivingly they have been disguised as “Questions people asked”, in the breadth without changing the tone, implicate Prime Minister Najib’s poor and weak policies, management capabilities and worse of all, carelessness.

Even the most technically competent critics have narrowed their scope to dissect all these new information being introduced into public consumption for the first time by 1MDB.

The Star story:

Published: Wednesday June 17, 2015 MYT 12:00:00 AM
Updated: Wednesday June 17, 2015 MYT 7:28:22 AM

1MDB answers its critics

PETALING JAYA: 1Malaysia Develop­­ment Bhd has defended itself against criticism by former prime minister Tun Dr Mahathir Mohamad by addressing various issues, from the Cabinet being unaware of a fund-raising exercise for its start-up in 2009 to events leading to its investments in Cayman Islands increasing to US$2.318bil (RM8.57bil).

The fund that is wholly owned by the Finance Ministry has come under relentless attacks from not only Dr Mahathir but also some ministers for its cash-flow problems in meeting obligations for its debts of RM42bil.

Rebutting allegations that a Cabinet paper was not prepared for the Government guarantee that allowed 1MDB to raise RM5bil in Islamic bonds in 2009, the fund said the matter was prepared and approved by the Cabinet.

It also said the RM5bil Islamic bond issuance was fully underwritten by AmBank, which earned all the commission and not Goldman Sachs.

The other contentious issues raised by Dr Mahathir that 1MDB addressed were:

> The interest per annum on the RM42bil loan is RM2.4bil, and not RM3bil;

> The RM5bil Islamic debt paper was issued at a yield of 6.15%, not 7% as alleged, and that it was fair given the tenure of the paper stretching over 30 years;

> The RM2bil loan furnished by billionaire T. Ananda Krishan’s Tanjong group to 1MDB in February was in accordance with an agreement signed between both parties on Aug 7 last year;

> The Tun Razak Exchange (TRX) land was acquired for RM230mil, not RM320mil as alleged. 1MDB has to build the infrastructure for the TRX development that comes up to RM1,500 per sq ft;

> PetroSaudi International (PSI) injected oil fields in Turkmenistan and Argentina worth about US$2.7bil into a JV company which 1MDB paid US$1bil for a 40% stake. Dr Mahathir alleged that PSI did not “inject a single cent” into the JV company; and

> The 40% stake in PSI was later converted into an Islamic loan. 1MDB’s total exposure to PSI between September 2009 and June 2012 came up to US$1.83bil. The loans were converted to equity and eventually sold for US$2.318bil, an exercise that 1MDB claims earned it a return of US$488mil.

1MDB said the US$2.318bil was put in a Cayman Islands-registered fund and in return it received “fund units”.

“These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian,” it said in a statement yesterday.

The value of the investments held by Brazen Sky in BSI Bank came into question because the money is not in the form of cash but “units”.

In March, Prime Minister Datuk Seri Najib Tun Razak told Parliament that 1MDB’s investments had been redeemed and the “money” was placed with BSI Bank.

In May, the answer was amended to state that the investments had been redeemed and were in the form of “units”.

1MDB president and group executive director Arul Kanda Kanda­samy was also reported to have said on foreign media that he had seen the cash.

On this matter, 1MDB denied that Arul Kanda had said he had “seen the cash” and stated that there was a misunderstanding that led to the answer by Najib, who is also Finance Minister, in Parliament.

****************

That is actually good and moving forward because from now on, it would be the battle of wits for those who understand the complex intricacies of the capital and debt markets, coupled with the exercise to acquire and re-list large corporations in a very short span of time and opportunity.

That is not withstanding the ambitious and courageous corporate move to do mega super luxurious integrated property development programs, matching the intensity of new financial hubs in the likes of Shanghai, Singapore, Dubaii and Abu Dhabi.

Unless we are drawn into those who purposely wanted to throw spanners to the works every opportunity arises and destabilise the system for all the wrong reasons. The systematically crave to erode confidence and turn the people against the Ruling Party and Federal Government.

Pro-Anwarista Malaysiakini newsportal story:

7:23AM Jun 17, 2015
Malaysiakini

Report: PM’s brother to start new political party

643 79 3 40

Banker Nazir Abdul Razak, the younger brother of Prime Minister Najib Abdul Razak, has initiated the formation of a new non-partisan political party to reach out to all races, the Asia Sentinel has reported.

The report said the new party seeks to “dramatically redraw the country’s political landscape” and put an end to divisive racial politics.

Nazir, who heads the CIMB Bank, is reported to have approached former deputy education minister Saifuddin Abdullah, one of Umno’s few liberal-minded leaders, to lead the new party.

“Nazir’s friends have advised him that he must emerge as the prime mover, or it won’t work.

“Saifuddin (photo), as much as he is respected as a moderate, doesn’t have the widespread clout to attract support,” says the report.

When contacted by Malaysiakini, Saifuddin declined to comment on the matter.

The Asia Sentinel report comes amid the start of Pakatan Rakyat’s disintegration and increasingly cozy ties between PAS and Umno.

This, said the report, has set the stage for possible political realignments, as BN component parties – MCA and MIC – might ditch Umno for more favourable partners.

Nazir, who is a widely respected banker and son of Malaysia’s second prime minister, could provide the platform for a new coalition, it said.

Muhyiddin ‘not acceptable’

Over the past few months, Nazir had shown himself to be critical of Putrajaya’s policies, especially in the handling of the 1MDB controversy, giving him an air of credibility.

And unlike other unsuccessful political upstarts, the report noted that Nazir and his business cohorts are very capable of raising the funds necessary.

Asia Sentinel added that former PM Dr Mahathir Mohamad, the prime mover in the bid to oust Najib, is willing to wait until Umno’s annual general meeting late this year to install Muhyiddin as prime minister.

“Muhyiddin is hardly acceptable to Nazir’s moderates. He is a Malay nationalist himself and, at age 67, has amassed a fortune of suspicious size,” said the report.

“His son, Fakri, is also involved in many business deals, including a RM4.1 billion contract supplying 4G computers and Internet study to rural schools.

“He is partner to YTL in the project, called Bestarinet, which was reportedly engineered by Muhyiddin himself to YTL and which opposition leaders and teachers say is a failure.”

****************

Our advice is try to eye ball and keep up with this game where more mechanics of the complex investment banking play would be slowly surface. Otherwise, hold on to your horses and let those who are masters of the game do their job and reveal their work when it is time.

In simpler analogy, building sites are hoarded to allow the constructers and consultants finish their job without interference and the same time safety for the public is ensured. Only people involved and authorised have access to the progress of the project. Same goes to preparation of an elaborate meal for a banquet of heavy diners.

One would not get to see the end result until it is completely finished and that is when the critics should lash their thoughts and opinion. Not during the complexity and mess of the preparation for the banquet.

Probably it is too wishful to ask for ‘gloves off’ even though Ramadhan starts when the sun set this evening. Needless to say, in the suggestive words of the ‘good doctor’ to one to cease fire against one of then his most trusted loyalist slightly less than four years ago, “Try to tone down a bit lah”.

Selamat Menyambut Ramadhan Al Mubarak 1436H

Published in: on June 17, 2015 at 09:45  Comments (20)  

Putih mata, tiada hendaknya

Artist impression of the TRX

Artist impression of the TRX

The 67,954 sq. ft. residential plot which Tabung Haji took up within Tun Razak Exchange (TRX) that became highly contentious after a blog maliciously drawn controversy with the connotation that 8 million plus depositors’ funds are being made to “Bail out 1MDB financial woes”, is still available and yet to be hived-off.

Pro-Anwarista newsportal story:

Tabung Haji yet to sell 1MDB’s TRX land despite claims of ready buyers

BY RAM ANAND Published: 15 June 2015 11:41 PM

Pilgrims fund Lembaga Tabung Haji has yet to finalise the sale of its parcel of land at the Tun Razak Exchange (TRX) project, which it bought from 1Malaysia Development Bhd (1MDB) in April, Putrajaya said today. Minister in the Prime Minister’s Department Datuk Seri Jamil Khir Baharom said Tabung Haji was still evaluating potential buyers, even though its chairman Datuk Seri Abdul Azeez Abdul Rahim had in early May said that the sale will be completed in “a week or two”.

“Tabung Haji is still evaluating all the offers in its effort to make the best decision so that the whole process remains Shariah compliant,” Jamil Khir told the Dewan Rakyat today in response to a question from Tony Pua (DAP-Petaling Jaya Utara). The minister did not provide a specific timeline as to when the sale will be completed.

“We must be very thorough and careful in this sale, it involves the interests of the Muslims, so it’s important that we look after their interests,” he said. Pua later said that the delay was an indication that Tabung Haji was struggling to sell the land.

“The response from the minister is clearly an excuse to cover up the fact that Tabung Haji is having difficulty convincing any buyer to purchase the land for a price higher than what it has paid,” the DAP lawmaker said. Pua said the process to determine a bid for a piece of land would not take six weeks, and warned that a failure to complete the transaction as promised would only prove that no other buyers were interested in the land.

Tabung Haji purchased the land for RM188 million in April to develop a residential tower, 43 times the price the debt-ridden 1MDB had paid for the same plot, which it had bought from the federal government four years ago.

Mindful of a backlash and sensitivity among its depositors over the purchase, Tabung Haji quickly vowed to sell off the land at a profit soon after buying it, saying it had ready buyers which proved that the land had appreciating value and was a profitable venture.

Azeez said the decision to sell the land was on the advice of Prime Minister Datuk Seri Najib Razak, who is also chairman of 1MDB’s advisory board. – June 15, 2015. –

See more at: http://www.themalaysianinsider.com/malaysia/article/tabung-haji-yet-to-sell-1mdbs-trx-land-despite-claims-of-ready-buyers#sthash.7ZsWR2Ym.dpuf

*********************

If this story is true, then TH should not hive-off the only residential parcel within the TRX mega development area.

DAP Chief Propaganda Tony Pua has no right to give unsolicited opinion, because he does neither has the qualification to represent the TH depositors nor qualify to be a depositor to begin with. In fact, he is grossly out of place to make any comments about the TH deal in TRX.

The parcel could be made into a very productive asset with the current development order of 10.47 plot ratio. It means the land now could have a development area (gross floor area – GFA) of 710,000 sq. ft. Of that, a net build up and lettable area of 500,000 sq. ft.

The layout of TRX

The layout of TRX

At current market prices of similar luxurious residential in the area of between RM9.00-12.00, a prudent rental income of RM4.5-6million per month should be attainable.

That is between RM55-72million of income per annum, which is syariah compliant.If factored to the market four years away  on an expected to cater for demand of growth for high end properties, then an annual revenue of RM80-85million could be projected.

There are some points that the public should consider. The RM2,774 psf price that TH paid to TRX isn’t outrageous at all considering that TRX would be spending about RM1,500.00 psf to provide infrastructure for the mega development, which include 3 MRT lines.

The process for the acquisition of this parcel was made across the board, by professionals. TH was pre-qualified by valuers CH Williams in June 2014 and the due diligence by both parties were made from that point. The initial offer by TRX for the parcel was at the value of RM210million.

TH businesses which include income from property investments are being ploughed back as subsidy to undertake pilgrimage on top of dividends paid to depositors annually

TH businesses which include income from property investments are being ploughed back as subsidy to undertake pilgrimage on top of dividends paid to depositors annually

However the came into agreement in Dec 2014 for the deal to be sealed at RM194million. Then came the opportunity for TH to evaluate the proposal for the development of the TRX Signature Tower. After deliberation, TH investment panel deemed that the TRX Signature Tower is unable to be a property of wholesome ‘Syariah Compliant’ because of the nature of potential tenants.

Hence, they decided only for the parcel meant for luxurious residential. So the deal  initial 67,954 sq. ft. parcel was put in back burner and wasn’t inked till April 2015, when TH agreed to pay RM188.5million provided it was done in a bullet payment.

By far, TH got the first mover advantage for TRX where they are in the position to draw the first offers to take up the lease when it is completed. This could be substantiated by the other buildings that is coming up around the area.

It was said the plot where the Harrods Hotel is being built at the moment is acquired and valued at RM7,000 psf.

Star Property story:

Bukit Bintang Harrods Hotel part of RM30bil to be pumped into Malaysia by Qatar

Posted on January 29, 2013 | 5162 views | Topic : Featured, News & Articles. The Harrods Hotel in Kuala Lumpur Artist’s impression of the Harrods Hotel mixed development project at the corner of Jalan Raja Chulan-Jalan Conlay

By Chee Su-Lin | sulin.chee@thestar.com.my

Due to sit on the land off Jalan Raja Chulan that is now occupied by the Seri Melayu restaurant and Chulan Square (which are slated to be demolished), the new Harrods Hotel mixed development recently broke ground and is expected to be completed by 2018.

Besides the hotel, the project comprises two residential towers with apartments, an office building and a retail podium, with direct connectivity to Pavilion mall. The link is not just physical.

The mixed development is a joint venture between Tradewinds Corporation Bhd (controlled by Tan Sri Syed Mokhtar), the Pavilion Group (controlled by Malton Bhd’s Datuk Desmond Lim, among others), and Qatar Holding LLC (controlled by Qatar’s sovereign wealth fund).

The latter two were also owners of Pavilion mall before it was listed as part of the Pavilion REIT. Qatar Holdings bought out London’s famous Knightsbridge shop from Egyptian Mohamed Al-Fayed in 2010. Since then, the new owners have aimed for Harrods to become a “global enterprise that defines the luxury retail and leisure sectors”. Dr Hussain briefing on the Harrods Hotel Dr Hussain brought with him good news of billions of dollars of investment from Qatar.

The company in fact already has stakes in several luxury companies, including French conglomerate LVMH Moet Hennessy Louis Vuitton, US jeweller Tiffany and German car maker Porsche.

Since the credit crunch of 2008 and 2009, Qatar’s sovereign wealth fund has become the world’s global banker of sorts, having also picked up shares in British bank Barclays, British supermarket Sainsbury’s, and US film studio Miramax, among others.

Qatar decided for Malaysia to house one of the world’s first three Harrods hotels because of the country’s good investment environment and because Malaysia gets up to 25 million tourists every year, said Qatar Holding LLC vice chairman Dr Hussain Ali Al-Abdullah at the recent groundbreaking ceremony.

Qatar plans to invest a total of US$10bil (RM30bil) into the country over the next three to four years. Around half of this will be pumped into Johor’s petrochemical hub in Pengerang, he said. Qatar was also a cornerstone investor in Felda Global Ventures, injecting US$100mil (RM300mil) into the listing.

Asked on whether this money would continue to be invested into the country if the government were to change in the next general elections, Dr Hossein said, ““We love Malaysia and we love the people of Malaysia so we will always invest in Malaysia.”

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The fact is that good parcels around the financial and high end districts of Kuala Lumpur especially around the ‘Golden Triangle’ and KLCC neighbourhood are somewhat scarce. TH landed a good opportunity to build a luxurious residential building, where even in the current market, the demand is in high and encouraging.

TH BoD announcing the hasty decision to hive off the 1.6ha TRX parcel a month ago

TH BoD announcing the hasty decision to hive off the 1.6ha TRX parcel a month ago

TH BoD should seriously reconsider Prime Minister Dato’ Sri Mohd. Najib Tun Razak’s ‘suggestion’, especially the heat on the the pressure on the question of the parcel made contentious through social media had withered.

Indonesian Mulia Group’s acquisition of the TRX Signature Tower which was initially offered to TH provided the ‘Putih Mata‘ effect to many level headed Malaysians, including the non-Muslims who are not depositors in TH.

The Star story:

Indonesia’s Mulia Group to develop TRX’s Signature Tower

Wednesday, 13 May 2015 KUALA LUMPUR: Indonesia leading property developer Mulia Group will develop the international financial district Tun Razak Exchange’s (TRX) landmark Signature Tower building. TRX’s master developer 1MDB Real Estate Sdn Bhd and the Mulia Group signed a sale and purchase agreement for the development rights of the plot.

The land transaction is valued at RM665mil. A joint statement released on Wednesday said the Signature Tower building will be a highly visible focal point for TRX. As it will be TRX’s tallest building and have its largest floor plates, the tower is poised to be a Prime Grade A office space in Kuala Lumpur. Mulia Group is the latest investor in the TRX after Lend Lease International, a global property and infrastructure group, which is developing the RM8bil Lifestyle Quarter.

The other investor is Veolia Water Technologies, whose water management technology will halve potable water use in TRX. Commenting on Mulia Group’s entry, 1MDB RE chief executive officer Datuk Azmar Talib said: “We are pleased to have the Mulia Group on board towards realising the potential of the Tun Razak Exchange. This significant investment underscores foreign investor confidence in Malaysia.”

The Mulia Group, which has a leading market share for premium commercial properties in Jakarta, developed, owns and manages seven premier office buildings in Jakarta’s central business district, including the Wisma Mulia 1 and 2. Wisma Mulia 1 and 2 are ranked amongst Jakarta’s tallest and most prestigious office buildings that together house key global and local blue-chip companies in Indonesia.

The Mulia group has also developed and managed internationally renowned hotels, and residential and shopping mall properties. Mulia Group president director and owner Eka Tjandranegara he was excited to embark on the project to develop the Signature Tower to become the new landmark of Kuala Lumpur city. “Our Mulia Group wishes to be an integral part of this iconic state-of-the-art development not only for Malaysia but for the region and beyond.”

“We see TRX’s potential to further develop the city’s role as a financial capital, and the Tun Razak Exchange aids our growth and expansion plans. I am committed to personally seeing this project through, drawing from our vast experience,” he said.

The Mulia Group’s properties also include their award-winning Hotel Mulia Bali which essentially comprises of The Mulia, Mulia Resort & Villas in Nusa Dua, Bali. In the past two years, the resorts have been awarded six prestigious awards by Condé Nast.

TRX’s significant investment in its infrastructure is to create a truly accessible world-class financial hub. Tenants can connect to the city centre and the rest of Greater KL, via the largest integrated underground MRT interchange station.

The MRT will connect TRX to the proposed High Speed Rail terminus station at Bandar Malaysia, linking TRX to Singapore’s financial centre.

********************

Later in the month (next two weekends to be exact), 1MDB real estate arm would reveal the mega master plan of the Bandar Malaysia after the request for proposal (RFP) has been issued last week.. The 486 acres mixed mega development where 220,000 people are expected to work, live and past through daily, is expected to bring a gross development value (GDV) of RM145-150 billion. 

The perception and expectation of 1MDB is expected to change and confidence of moving forward towards the right direction would slowly be restored.

That is hopefully would add confidence that TH did make the sound business decision and should keep and develop the 67,954 sq. ft. TRX residential plot, at the right time and opportunity. Thus, provide the 8 million plus TH depositors the feeling of ‘Putih mata, tiada‘.

*Updated Tuesday 16 June 2015 0800hrs

MPs have stood up and in strong messages urging that TH to hold on to the 67,954 sq. ft. parcel meant for luxurious residential within the TRX mega development.

The Star story:

Published: Tuesday June 16, 2015 MYT 9:38:00 AM
Updated: Tuesday June 16, 2015 MYT 9:40:00 AM

MPs urge Tabung Haji not to sell TRX land

BY YUEN MEIKENG AND RAHIMY RAHIM
KUALA LUMPUR: Several Barisan Nasional MPs have urged Lembaga Tabung Haji to keep the parcel of land it bought from 1Malaysia Development Bhd (1MDB) as it could appreciate in value.

“From a businessman’s point of view, perhaps it is better not to sell the land first. What’s wrong with keeping the land if it could appreciate in value?” Liang Teck Meng (BN-Simpang Renggam) said during a minister’s winding up speech for the debate on the 11th Malaysia Plan in the Dewan Rakyat on Monday.

Datuk Seri Abdul Ghapur Salleh (BN-Kalabakan) added Tabung Haji is not a RM2 company, implying that it has vast experience in investments.

“Don’t sell the land because if we keep it, we stand to gain from it as it will increase in price,” he said of the parcel of land located at the Tun Razak Exchange (TRX).

Amran Ab Ghani (BN-Tanah Merah) also urged for Tabung Haji to reconsider selling the land, saying that those who criticised the decision had ill intentions.

Minister in the Prime Minister’s Department Datuk Seri Jamil Khir Baharom said he would take note of the MPs calls and convey them to the Tabung Haji board to review.

He said all investments are made based on business transactions and not from orders from him or the Government.

Earlier, to a question by Tony Pua (DAP-Petaling Jaya Utara) on the update of offers to buy the TRX land, the minister said Tabng Haji was still evaluating the best offers.

“When we sell the land, we do not just want a return of our capital but we want to make a profit,” he said.

******************

Clearly, the sentiments are for doing the right thing quite against the one being spooked for the sinister instigation by a cowardice blogger who is believed to be obsessed to topple Prime Minister Najib.

*Updated 1100hrs

Published in: on June 15, 2015 at 23:59  Comments (23)  

Separating the trees from the wood

Media organisations which are indirectly acting on behalf of personalities in sordid attempts to riddicule the heightened attacks against controversies such as the ‘1MDB scandals’ ought to be able to separate the battles they wish their ‘enemies’ to be drawn into.

In the aggressiveness of Fourth Prime Minister Tun Dr. Mahathir Mohamad’s strong criticism and eventually evolved to attacks in the past 10 weeks which demanded Prime Minister Dato’ Sri Mohd. Najib Tun Razak to resign, the retaliation is somewhat amateurish if not childish.

TV3 trained its guns at Proton, for defaulting on the Teksi 1 Malaysia (TEKS1M) program and poor quality Proton Sagas. The anguish of taxi drivers is being harped for four nights in a row.

Prime Minister Dato' Sri Mohd. Najib Tun Razak endorsement of the Proton Exora as the Teksi 1 Malaysia

Prime Minister Dato’ Sri Mohd. Najib Tun Razak endorsement of the Proton Exora as the Teksi 1 Malaysia

It is because Tun Dr. Mahathir last year came into Proton Board of Directors (BoD) as the Chairman.

The TV3 story is an attempt of a sinister agenda in nature, to indirectly rubbish Tun Dr, Mahathir who incepted Perusahan Otomobil Nasional as the national car project more than thirty years ago and still is very fond of the idea to make Malaysia an automobile producing nation.

These prime time reports failed to highlight the complete information to the few points as contentious, in which being presented otherwise as a propaganda to condemn Proton.

Good times. The endorse for Proton Saga. Today, TV3 says many taxi drivers are angry with this model

Good times. The endorse for Proton Saga. Today, TV3 says many taxi drivers are angry with this model

One, taxi drivers face problems getting their warranties void and Proton dishonouring them. The other is the delay in the delivery of Proton Exora as part of Federal Government via SPAD program of the introduction of  Teksi 1 Malaysia.

These Proton cars were delivered with Campro engines. Most of the taxi drivers converted them to be NGV-enabled, so that they can save on fuel bill since for a long time government disallowed for the increase in fare for taxis even though operation costs escalate.

What the TV3 story failed to allow Proton to explain is that the warranty void arisen from the tempering with the engine.

The late delivery of Proton Exora is because ‘initial instructions’ was about to supply high-specs taxi (to match the ones that is being used as TX4 in London etc.) but taxi operators refuse to pay for the increased in price and prefer the lower-specs instead. There is other contentious issue of SPAD has been seen as lacklustre in playing the role to ensure that the financing of these Proton Exoras is made easier for operators and drivers.

President Jokowi being showcased with Proton latest indigenous product Iriz by Chairman Tun Dr. Mahathir at Proton plant in Shah Alam

President Jokowi being showcased with Proton latest indigenous product Iriz by Chairman Tun Dr. Mahathir at Proton plant in Shah Alam, accompanied by senior Cabinet Minister Dato’ Sri Mustapha Mohamad and Dato’ Seri Dr. Ahmad Zahid Hamid

This is highly inconsistent and bent towards politically inproductive since in the recent inaugural visit by Indonesian President Joko Widodo, Proton was showcased as one of the industry that is Malaysia’s pride.

Those who are responsible to issue ‘instructions’ for TV3 to do this must also stop and in which ever ways start to realise that there are multiple times more happy Proton users and loyalists from the four million produced and sold in past thirty years as compared to the disgruntled ones. Slighting them in any way and degree would inevitably jeopardise confidence or even support towards Prime Minister Najib and his administration. Certainly even more than the imagination of gaining political mileage otherwise.

Its baffling to even think that media professionals and experienced journos are able to be cowed by political-king-maker wannabes for something which could only be viewed as such a childish lame political prank.

Published in: on June 14, 2015 at 15:00  Comments (23)  

Separation of doors and brief cases

Separate doors to No. 10 and No. 11 Downing Street, Whitehall

After the two years after earning his own mandate, it is time that Prime Minister Dato’ Sri Mohd. Najib Tun Razak do a Cabinet reshuffle and appoint a full time ‘Red Box Minister’, in the effort to move on further and quicker.

It makes sense because Prime Minister Najib hold be giving a lot of focus to his job as the Head of Federal Government and Chairman of Barisan Nasional (BN), which is the ruling party. Moreover, in his tour around the nation, the people came in droves to demonstrate their support for him.

Sarawak gives Najib their full support

Posted on 4 June 2015 – 04:49pm Last updated on 4 June 2015 – 09:57pm

KUCHING: Prime Minister Datuk Seri Najib Abdul Razak appears to have, during his two-day visit to the state, fortified his position with firm commitment of support from Sarawak. Sarawak appears to be the latest state after Sabah and Perlis to voice full support for him and the Barisan Nasional (BN).

“Just now, the Sarawak Chief Minister (Tan Sri Adenan Satem) said to me, ‘You are not alone,’ and I responded with, ‘I’m glad that I’m not alone’,” Najib told a crowd at the leader-meets-people session, #sarawakfornajib, at Stadium Perpaduan here today.

“Tonight, my wife and I can sleep soundly … we feel relieved as it is clear that Sarawak BN so sincerely supports me. I can read people’s hearts,” he said. “This is my era as PM (prime minister). Should I step down just because someone demands it? I was chosen by whom? The people, and not just the Malayan people (Peninsular Malaysians). The people of Sarawak also chose me as ‘Apai Besar’ (prime minister).

“I want to ask Sarawak people … whether they still want me as PM or not?” he asked, to thunderous cheering and a one-word response of “Nak” (want) from the crowd.

“My spirit will not be broken, the blood (flowing) in me is no ordinary blood. Sometimes, I may be seen as diplomatic, but the warrior spirit is there in me. Do not underestimate me, I will continue to fight, and I believe Sarawak BN is with me,” he said.

Najib vowed to continue lead the nation and continue the struggle to fulfil several agendas, stressing that the most important thing is to make Malaysia a developed country. Meanwhile, Najib said he is in talks with Adenan on how devolution of power can be implemented in Sarawak.

“All these years, most of the power is held by the federal departments and decisions are made in Putrajaya. It is time for the power to be transferred to the Sarawak state government departments.” On Adenan’s request for additional oil and gas royalty, Najib said he will review the application.

“If possible, I want to give (additional royalty) to Sarawak so that the oil and gas sector can bring more wealth to the state.” Najib said since becoming prime minister five years ago, he had approved on the spot, over RM1 billion in development allocations for Sarawak, including for the Pan Borneo Highway. Adenan, who spoke earlier, said Sarawak fully supports the leadership of Najib after looking at his sincerity in helping to bring development to Sarawak.

“We in Sarawak know the meaning of being grateful to those who have helped. We support him (Najib) because it is the right thing to do.”

“He is under siege left and right by those who are ungrateful in the peninsula, including those in Umno itself, who do not know how to be thankful, but only know how to stab in the back.

We in Sarawak are sincere. If we say we support you, we do,” he said. – Bernama

******************

It is only fair that Prime Minister Najib reciprocate all these overwhelming support, with providing more attention as a Chief Executive and prime political leader.

He received equally thundering support in Sabah, Johor and Perak, in this round of meeting-the-rakyat sessions, ever since Fourth Prime Minister Tun Dr. Mahathir Mohamad openly criticise him almost two months ago.

The most damning complaint about Prime Minister Najib is his former boss’s charge on the 1MDB scandal of a sum of RM42 billion, which was presented between “Disappeared”, “Loss” and “Irrecoverable debts”.

The breakdown of the RM42 billion debt, which Tun Dr. Mahathir harped on

The breakdown of the RM42 billion debt, which Tun Dr. Mahathir harped on

Yesterday, 1MDB Group Executive Director Arul Kanda Kandasamy briefly broken down where the RM42 billion resides.

Moving forward, what Prime Minister Najib is a full time Minister of Finance. It is a simple reason because  there are so much work needed to be done and settled quickly, namely:

1. Plan, drive, supervise and monitor the Federal Government spending and the national economy

2.Plan, drive, supervise and monitor the Federal Government role and interaction with State Governments

3. Execute plans with regards to the GTP, EPP and BEEP programs

4. Ensure the success of Malaysia arriving to the deadline of Vision 2020 and there on, move forward

5. Ensure the robustness and resilience of the economy

6. Execute plans with regards to the 13GE manifesto

7. Restructure, plan, drive, supervise and monitor Khazanah Group of GLCs

8. Restructure, plan, drive, supervise and monitor 1MDB Group of conglomerates

9. Build and strengthen the national reserve

10. Build and strengthen the capital and financial markets, especially on Islamic and Syariah compliant sector

Prime Minister Najib should also consider that the Minister of Finance should also be the spokesman to represent the Federal Government, which  through Ministry of Finance is the only shareholder of the strategic investment corporation 1MDB. The contentious overtone already painted the corporation, all the deals and personalities involved are of undesirable connotation.

Addressing this problem alone requires a fresh personality as the Minister of Finance.Especially the requirement to stand and face the media, analysts, investors and industry over so often, as the TRX, Bandar Malaysia and Edra Energy progresses and grow.

It is almost impossible that Prime Minister Najib could continue to play this challenging role, on top of the deliverables as a Prime Minister. Even with a Second Minister of Finance, it would not be as effective and productive as having a full time ‘Red Box Minister’.

A full time ‘Red Box Minister’, with the relevant industry, corporate restructuring and governance exposure and experience on top of illustrious track record to fill in the shoes of the man (or woman) with the tall order of deliverables. Needless to add, he (or she) preferably posses the co-operation of the professionals (public and private sectors alike),  confidence of the market, trust of the rakyat as well as free from any baggages.

It is probably the most courageous decision he makes in the past six years as the Sixth Prime Minister of Malaysia. It is a combination of perfect timing as well as strategically advantageous, for the government and party.

Published in: on June 4, 2015 at 23:57  Comments (14)  
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